Banking on Convertible Currency.

We come now to the period in which the currency consisted more or less of bank-notes, nominally convertible, issued by chartered banks. The system to which it has most analogy is that of the Scotch banks, although of these latter only three are chartered, the others being joint-stock companies and partnerships. We shall have abundant proof that this system of free banking requires, as its indispensable conditions, moderation, sagacity, and scientific knowledge on the part of the bankers. Without these qualities in the managers, it is as wild as any scheme of paper money. Men who believe that “ banking” consists in making paper issues and loaning them, making them as large as possible and stimulating them by all artificial means, and discouraging conversion as much as possible, may, as we shall see, bring down more ruin on the community by this engine than by any other.

The Bank of North America had already been founded. Its success in earning dividends led to other similar enterprises. Massachusetts chartered the Massachusetts Bank in 1784. Soon after, a bank was chartered in New York and another in Maryland.